The Emirates Economist

Wednesday, April 30, 2008

Are you sure you want to pursue a college degree?

Among high-school students who graduated in the bottom 40 percent of their classes, and whose first institutions were four-year colleges, two-thirds had not earned diplomas eight and a half years later. That figure is from a study cited by Clifford Adelman, a former research analyst at the U.S. Department of Education and now a senior research associate at the Institute for Higher Education Policy. Yet four-year colleges admit and take money from hundreds of thousands of such students each year!

Even worse, most of those college dropouts leave the campus having learned little of value, and with a mountain of debt and devastated self-esteem from their unsuccessful struggles.

Pedro Carneiro and Sokbae Lee found as more people pursued higher education the quality of a typical college graduate decreased. The relative scarcity of quality graduates can explain the premium to higher education rather than the total number of graduates. This suggests some incurred the cost of post secondary education, but did not reap its premium. It may also explain why post secondary enrolment increased, but so did drop out rates. Workers might have recognized the value of education and initially pursued it. But, they soon realised the returns to the education they actually had access to was not substantial enough to warrant time away from the labour market.

These studies are from the US. My experience in the UAE is that similar results hold. I would emphasize, though, that not all high schools are the same. If you had a choice of high schools, and you did not choose the more challenging school you are likely to be in for a tough time -- and a long stay (or drop out) -- in a college that expects you to perform.

Tuesday, April 29, 2008

Saudis to creat sovereign wealth fund

The decision to create an investment fund occurred only after months of internal debate among the kingdom’s cautious decision-makers. Some queried whether the nation really needed a fund. If so, who would manage it: would it fall under the responsibility of the finance ministry, or the central bank, which has managed the kingdom’s foreign assets? And, critically, how big would it be?

There was even speculation that more than one entity would be launched, enabling the funds to be sector specific.

There is also the issue of “blame and claim”, according to one analyst, who argues that few wanted to be blamed in the event of making the wrong investment decisions, while many would wait in the wings to claim recognition for taking the right investment decisions.

Another crucial factor that sets Saudi Arabia apart from its neighbours – and partly helps explain why the country has not previously set up a sovereign fund – is the size of the country. With some 17m Saudi citizens, and about 7m expatriate workers, the nation has a population far higher than the rest of the other five Gulf Co-operation Council states combined, with oil revenue per capita that only betters that of Oman in the GCC.

This has meant Saudi Arabia has spent more of its revenue internally and has a greater absorptive capacity than its smaller neighbours.

The kingdom has invested conservatively, with an eye on liquidity to help it through downturns in oil price cycles.

About 85 per cent of foreign exchange reserves are invested in dollar-dominated fixed-income securities.

“The proposed investment company’s strategy...would, on a general and basic level, be similar to that of a number of existing portfolio investors – for example Norway’s GPF [Government Pension Fund] or Singapore’s GIC [Government of Singapore Investment Corporation] – while taking into account the specific requirements of Saudi Arabia,” Mr Maiman said.

Analysts said the relatively small size of the sovereign fund’s initial capital reflected Riyadh’s conservatism but was also a result of the backlash sovereign wealth funds had generated as other Arab and Asian states used state investment vehicles to acquire assets in the west.

Monday, April 28, 2008

Tragedy of the common teaspoon

Epidemiologists at the Burnet Institute in Melbourne, Australia, once found an unusual way to study a "tragedy of the commons" -- a conundrum that pits individual interests against the collective good....Although teaspoons disappeared from all common areas at the Burnet Institute, Aitken said they disappeared more slowly from common areas used by people who worked closely together -- who had long-term relationships of trust -- compared with communal areas used by strangers.

What should you do? Pulling out of the race means giving up your dream -- when you think you are the better choice. Staying in risks collective disaster.

The fault line in this dilemma -- the interests of a candidate pitted against the collective interest of his or her party -- shows up in many economic and political domains and is sometimes called the "tragedy of the commons." Individuals embroiled in similar dilemmas find them impossible to solve on their own, because they are confronted by a Hobson's Choice: Act selfishly and cause collective disaster, or act altruistically and aid someone else who is acting selfishly. Either way, selfishness wins.

Kuwati men would be banned from marrying attractive maid-servants under proposal

Nawal Al-Muqaihit, a third district candidate said that if she was elected to Parliament she would submit a proposal forbidding Kuwaiti men from employing attractive maid-servants. She noted that the frequency of Kuwaitis marrying maids have risen and the government should pay attention to this loss of Kuwaiti identity. Al-Muqaihit remarked that Filipinos and Sri Lankans top the list. She added that Kuwaitis have now become in-laws to people in the Philippines and Sri Lanka.

The Gulf: There's bad loans arising

“The rise in the number of bad debts in the Kingdom is largely because of the lack of prudence on the part of Saudis in general when they invest borrowed money in stock markets without making a scientific analysis of the market trends,” Al-Eqtisadiah daily quoted Abdul Rahman Al-Sultan, an economic expert, as saying.

Sultan said the borrowers’ losses in the stock markets made it impossible for them to repay their loans. According to Al-Sultan the value of loan defaults last year was SR7 billion, up from SR5 billion the year before. This means that nearly 3.6 percent of the SR197 billion in personal loans went sour last year in a significant increase from the pervious year.

The number of loans has exploded since 2000. In years prior to 2000, total personal loans never exceeded SR10 billion in a given year. The recent trends in stock market investing have exacerbated the demand for personal loans.

Al-Sultan said a study he has conducted showed that 97 percent of borrowers are between the ages of 20 and 40 and are government employees in the cities of Riyadh, Jeddah, Makkah and in the Eastern Province. More than 90 percent of all loans were taken out for consumer purchases or to invest in the stock market.

The Federal National Council (FNC) approved on Tuesday several recommendations to solve the growing problem of personal loans.

The session was attended by Obaid Humaid Al Tayer, Minister of State for Financial Affairs, and Sultan Nasser Al Suwaidi, Governor of the Central Bank.

Yousuf Obaid Al Nuaimi, of the personal loans committee, read out the committee's report which was drafted after five meetings since August 2 last year. The committee interviewed many representatives from both the government and private sector.

The report noted a massive growth in loans, from Dh155.2 billion in 2000 to Dh695 billion in 2007. About 10,000 people are in courts or jail because of loan difficulties, according to the report....The committee noted that laws are not effective to reduce the problem, while the ministry of finance, the central bank, and the community are not capable of putting an end to this problem.

Members of the FNC debated with the minister and the governor over the idea of establishing an independent federal credit body or bureau aiming to provide a centralised data-base and index on the risk of loans.

Saturday, April 26, 2008

From taboo to routine

Cosmetic surgery, once considered taboo in the Middle East, is becoming popular in the region, with a large majority of elite women and men going for it of late....Men usually go for hair restoration surgery, including hair transplantation, restoration of scalp, eyebrow, eye lashes and moustache; liposuction; chin augmentation to look more masculine; lip implant; and tummy tuck.

Women, particularly Arab ladies, go for breast augmentation, breast implants, breast reduction, breast lifting for sagging breasts which is very popular among those with many children, lip implants, liposuction, minor facelift, post-bariatric (obesity) surgery, rhinoplasty or nose lifting, skin rejuvenation and many others...Dr NihalAboushousha, director of marketing and business development of AACSH [American Academy Hospital Cosmetic Surgery in Dubai Healthcare City], said cosmetic surgery is becoming more popular among people in the Middle East than the West.

She explained that the American Academy Hospital Cosmetic Surgery chose to open a branch in Dubai because the statistics showed several Emiratis had been travelling to the US for cosmetic surgery worth billions of dollars.

Kuwait Times 'Kuwait Plast 2008' This year the conference is concentrating on the problem of flaps, which occur after liposuction.

"Obesity spread in the Kuwaiti society, and many people suffer from this disease. Some of them decide to put an end to this problem, so they underwent liposuction, which can cause flaps. Now they don't know what to do with the access (sic) skin, which should be removed with plastic surgery."

Cosmetic surgery is commonplace in Iran, where the number of nose jobs performed each year is about the highest in the world. As AzadehMoaveni notes in Lipstick Jihad, "To live in Tehran and not surgically enhance something would be like going to a designer sample sale and walking out empty handed." Interestingly, the nose bandage is a status symbol in Tehran and some even wear a nose bandage purely for social credit, when really no operation had been performed.

Why the Iranian obsession with appearance? In the case of nose jobs, there's a fairly straightforward answer: Since the Revolution, in 1979, the face has been the only part of the female body others could see, so fixating on it makes sense. But an emphasis on beauty also has deep historical roots in Iran. As one local told me, "Traditionally, Iranians believed that by taming and beautifying 'rough,' 'savage,' and 'uncontrolled' nature, it would lead to a higher level of godliness and spirituality. The word 'paradise' comes from the ancient Farsi for 'garden' and is a symbol of this consciousness." Indeed, a popular Persian carpet motif is a microcosm of this: It is a bird's eye view of a garden--walls around the edges, a fountain in the middle--a symbol of perfection brought into the house. Another Arab friend of mine had a cruder, but related thought about why Iranians obsess over appearance. "They have a superiority complex," he said--in other words, beauty is a way to show that they're a superior, more civilized people.

Friday, April 25, 2008

Consequences of the Hajj

David Clingingsmith, Asim Ijaz Khwaja and Michael Kremer:

We find that Hajjis (those who have performed the Hajj) are more likely to undertake universally accepted global Muslim religious practices such as fasting and performing obligatory and supererogatory (optional) prayers. The Hajj reduces performance of less universally accepted, more localized practices such as using amulets and the necessity of giving dowry. For example, the Hajj increases regularly praying in the mosque by 26% and almost doubles the likelihood of nonobligatory fasting. At the same time, it reduces the practice of using amulets by 8% and the South Asian belief of according unequal marriage priority to widows relative to unmarried women by 18%.

The evidence suggests that the Hajj increases tolerance, which seems to apply not just within the Islamic world but also beyond it. Hajjis return with more positive views towards people from other countries. Hajjis are also more likely to state that various Pakistani ethnic and Muslim sectarian groups are equal, and that it is possible for such groups to live in harmony. These views of equality and harmony extend to non-Muslims as well. Hajjis are 22% more likely to declare that people of different religions are equal and 11% more likely to state that adherents of different religions can live in harmony.

Concerned that these results merely reflect predispositions of those who would choose to attend the Hajj? Note that their method "method compares successful and unsuccessful applicants in a lottery used by Pakistan to allocate Hajj visas."

Thursday, April 24, 2008

The role of the US bio-fuels program in the global food crisis

Peter Timmer is Visiting Professor in the Program on Food Security and Environment at Stanford University and a Non-Resident Fellow at the Center for Global Development. In a Q&A he says,

Unless some way can be found to stop the explosive rise in food prices generally, and rice prices in particular, we will see sharply higher mortality. Most of these deaths will be in Asia because of the huge numbers of poor, hungry people there who are dependent on rice for their daily subsistence.

This will not be mass starvation, with people dying in the streets, but it will be sharply higher infant and child mortality and weakened adults succumbing prematurely to infectious diseases. If current rice prices in world markets are actually transmitted into most Asian countries--and this is not yet a reality, but it becomes more likely every day the world price stays this high--then even conservative calculations suggest that upwards of 10 million people will die prematurely....The trigger for the explosion in rice prices was the decision of the Indian government to impose an export ban in November 2007, taking the world's second largest exporter out of the market. That set off fears in the newly elected, populist government in Thailand that rice prices would get out of control there, so export controls were openly discussed-- Thailand is the world's largest rice exporter. Vietnam followed with export restrictions in January 2008.

On the import side, the Philippines has been throwing fuel on the fire by insisting on huge tenders for rice from a world market that cannot provide it, thus driving up the price in this thin market. ...There are two obvious things the rich countries can do: first, boost supply by funding food aid channels, including the World Food Program and others, with cash and commodities. Rice is now quite scarce physically in a number of distressed countries--a reversal of situations caused mostly by local crop failures or disasters. Second, end bio-fuel subsidies and mandates immediately. There is substantial disagreement over the role corn-based ethanol (in the U.S.) and vegetable oil-based bio-diesel (in Europe and some parts of Asia) in the recent price spikes--the "respectable" range is from 10 to 60 percent. But there is no way the rich countries can play a leadership role in bringing this crisis under control as long as they insist there is plenty of food for people, livestock, AND automobiles. There just isn't--and we've known that from the start of the U.S. bio-fuels program.

At econbrowser James Hamilton provides a graphic showing the growth of ethanol corn use in the US. Hamilton asks,

How should a well-fed American react when some of the world's poorest citizens in Haiti and Bangladesh riot over the rising price of food? To be sure, there are many factors influencing food prices. But to me it's natural to begin with the element that represents a deliberate policy choice on the part of the United States. I refer to America's decision to divert a significant part of our agricultural production for purposes of creating a fuel additive for motor vehicles.

On one level, the question of whether it is morally acceptable for us to divert the food that might have fed the hungry for purposes of driving our SUVs is no different from similar questions about any of a number of other details of how the well-off dispose of their wealth. But I'm thinking that the profound inefficiencies associated with this particular disposition of resources may also be relevant. As a result of ethanol subsidies and mandates, the dollar value of what we ourselves throw away in order to produce fuel in this fashion could be 50% greater than the value of the fuel itself. In other words, we could have more food for the Haitians, more fuel for us, and still have something left over for your other favorite cause, if we were simply to use our existing resources more wisely.

We have adopted this policy not because we want to drive our cars, but because our elected officials perceive a greater reward from generating a windfall for American farmers.

[Bio-fuel production] has come in for particular scrutiny in America, where government incentives have led to a boom in ethanol production and have helped to tie movements in energy costs to those in food markets.

But the connection between energy and food prices doesn't stop there. Petroleum is an input to farm machinery, and dear petrol adds to the cost of food shipments. And, as Felix Salmon noted yesterday, fertiliser is overwhelmingly produced from natural gas. Mr Salmon quotes Paul Scheckel, who writes:

Fertilizer production is second only to petroleum refining when it comes to industrial use of natural gas in the United States: 97 percent of the fertilizer applied to crops is manufactured from natural gas. With spiking energy costs, fertilizer manufacturers are opting to close their doors and instead sell their natural gas supplies.

Interestingly, this creates another link between biofuel production and food costs. It seems that fields planted repeatedly in corn require an especially large dose of nitrogen fertiliser.

Child camel jockeys

Over at UAE community blog, nzm is putting 2 and 2 together. She finds that what the UAE promised in compensation to child jockeys ($9 million) is far in excess of what has been paid thus far. As in $1 for every $1000 promised. And that doesn't count the delay in payment.

Arbitrage opportunity

The price of diesel at Dubai's filling stations has increased by 40 per cent in six months, making it almost 80 per cent more expensive than that sold by Adnoc-operated pumps in Abu Dhabi.

The price of diesel per gallon went up from Dh14.30 to Dh15.30 in Dubai last night, the single biggest increase since October. Diesel sold at Dh11.00 per gallon in the city on October 23, according to transport industry sources.

Dubai fuel retailers Emirates National Oil Company (Enoc), which operates Enoc and Eppco brand service stations, and Emarat have been raising diesel pricing for several months, citing high international crude prices.

In other news, the UAE is doing is part in the world food price craze, buying high in order to create a strategic food reserve.

Sunday, April 20, 2008

Amitai Etizioni: Let them wear scarves

Headscarves are a test: a test of Western tolerance for legitimate differences among cultures and societies and within them. True, when wearing them is forced on women, as is the case in Iran and Saudi Arabia, they should be opposed like other such coercive dictates. However, at issue recently has been the lifting of the Turkish government’s ban on students wearing these scarves at Turkish universities, the French ban on Muslim women wearing the scarves in public schools, and the German ban on the scarves in some government buildings. Here some say that wearing these religious symbols reflects peer pressure or pressure from traditional parents. Well, if we banned people from wearing that which their peers or families promoted, they would run around naked. It is not the role of the state to counter peer and family pressure, as long as it remains nonviolent and the door is not closed on other social forces promoting their views.

Salesmen only in lingerie shops

All over the world, one finds saleswomen at lingerie shops. In our country — where officials are trying to introduce regulations granting women their rights — women are prohibited from working in lingerie shops. I wish this would change.

Women are not at ease with salesmen at lingerie shops. Women do not have privacy when they are out shopping, they deal cautiously and hesitantly with strange men who try selling them underwear and evening clothes. This is especially the case when they look for a particular size or a certain shape, color or material.

The issue of saleswomen working in lingerie shops has become a crucial one. The Ministry of Labor and the Ministry of Commerce must work quickly to solve this problem. Having an all women lingerie boutique inside shopping centers would not be as awkward as asking a strange man for your underwear size.

Thursday, April 17, 2008

2008 is UAE National Identity Year

The conference is being hosted by the Ministry of Culture, Youth and Community Development and it comes in line with President His Highness Shaikh Khalifa Bin Zayed Al Nahyan's announcement to mark 2008 as National Identity Year, and in support of the federal strategy that aims to reinforce national efforts to protect and promote national identity," Afra Al Saberi, General Coordinator of the conference told a press conference yesterday.

Proud Emirati makes a good observation. There is a basic inconsistency between lipservice given to concerns over demographic imbalance (UAE natives comprise 20% of the population), and the construction projects announced:

The real question is: do our decision makers really believe in what they say? Last time I checked there were dozens of projects lunched that would attract millions of laborer to the market. So I don't know whether they really mean what they say....

"Our future and national identity are strongly connected to the demographic structure issue, which requires collaborative efforts and teamwork," Shaikh Mohammad said.

...I don't know exactly what they have in their mind but what every Emirati would expect is an authority that would put regulations to increase the number of Emiratis, either by encouraging marriage and having children or by naturalizing limited selected number of people. Their objective should be to increase the number of Arab speakers by importing Arab laborers, restricting the number of other nationalities and forcing the Arabic language.

I note that while lipservice (no pun intended) is given to Arabic, the UAE shifted from use of Arab to Asian imported labor after Saddam's invasion of Kuwait. The reason is the imported labor in Kuwait demonstrated an allegiance to Saddam. Asians are more compliant and cannot claim a common Arab heritage as a basis for a political hearing in the court of public opinion.

At ArabianBusiness.com the spot poll of the day is "Do you agree that foreign workers pose a threat to the security of GCC countries?" These sorts of voluntary (i.e. unscientific) polls annoy me, but at least the question is being put out there. Currently 63% of respondents answer "No, foreign workers are important for the future of the GCC countries." If you don't like that, you might want to rush over and bias the result in some other direction.

The growing concern of Emiratis about being a minority in their own country surfaced again last week, with a senior official warning that it could lead to the collapse of the regime.

"I'm afraid we are building towers but losing the Emirates," outspoken police chief General Dhahi Khalfan Tamim said on Tuesday, referring to a construction boom in the emirate, fueled by foreigners buying property there.

Yale University exits Abu Dhabi deal

Yale University has canceled its plans to start an arts institute in Abu Dhabi because the university was unwilling to grant full Yale degrees there, something the emirate's government demanded.

The institute would have been on Saadiyat Island, where NYU's planned campus in the United Arab Emirates is being built.

But, according to the Yale Daily News, Yale President Richard Levin said that the New Haven university could not guarantee that its faculty in Abu Dhabi would be as distinguished as its professors in New Haven.

In a brief statement, Yale spokeswoman Helaine Klasky said that Yale is not interested in creating degree-granting branch campuses.

Beginning next Tuesday, Shvarts will be displaying her senior art project, a documentation of a nine-month process during which she artificially inseminated herself “as often as possible” while periodically taking abortifacient drugs to induce miscarriages. Her exhibition will feature video recordings of these forced miscarriages as well as preserved collections of the blood from the process.

Tuesday, April 15, 2008

Democratic terroritorial occupation, and suicide terrorism

[I]f a terrorist group chooses suicide tactics, then it is highly probable that a democratic country is occupying its homeland. This fact is certainly consistent with the existence of a "close association between foreign military occupations and the growth of suicide terrorist movements." In the remainder of this paper, however, we show that it is also consistent with either a weak or non-association, as well as with a strong negative association. The data Pape collects are only minimally informative about the association between military occupation and suicide attacks....It is important to note that our critique of Pape's analysis does not make the well-known point that association does not imply causation. Rather, because Pape collects only instances of suicide terrorism, his data do not even let him calculate the needed associations. The conditional probability of suicide terror tactics given territorial occupation, religious extremism, or any other potential cause, is unidentied and, thus, the attributable risk is also unidentied. Only after these identication issues are resolved can the equally important issue of determining whether the correlations have a causal interpretation be addressed.

Monday, April 14, 2008

Iran's successful kidney market

After a critical examination of what can be learned from the Iranian experience that will help the United States solve its organ shortage, certain conclusions seem inevitable: The portion of the National Organ Transplant Act of 1984 which prohibits the sale of organs should be repealed. The savings that will likely accrue should be spent on long-term study and maintenance of the vendor system and on the creation of mechanisms to ensure fair trading. Finally, because so much is still unknown regarding how organ sales would work in the United States, individual transplant centers and organ procurement organizations should be permitted to experiment with how to implement a system of organ vending.

Sunday, April 13, 2008

Flowers in the Sand

Frances Gunnison started her blog, Flowers in the Sand, in March 2007. Writing with a gentle grace, and including lots of colorful photos in her posts, she provides a delightful insight into what it is like to live the life of a Westerner in the UAE. Be sure to check it out.

The National - a new paper for the UAE

Former Daily Telegraph editor Martin Newland's new Abu Dhabi newspaper, The National, will launch within a fortnight.

It will have an editorial staff of about 200 and is designed to give the capital of the United Arab Emirates a national voice....The National is owned by an investment fund controlled by the Abu Dhabi government.

Deputy editor Hassan Fattah, a Californian of Iraqi parentage, worked for the New York Times and launched a newspaper in Iraq after the fall of Saddam Hussein. James Langton, Alan Philps, Sue Ryan and Bob Cowan held senior posts at the Telegraph, while Anna Seaman and Tahira Yaqoob came from the Daily Mail. Laura Koot, Brian Kerrigan, Rob McKenzie and Michael Jabri-Pickett previously worked with Newland when he launched the National Post in Canada for Conrad Black.

Newland's Abu Dhabi venture has also appointed Bill Spindle, the former corporate finance editor of the Wall Street Journal, as business editor.

This is a major venture that in financial wherewithall to rival top world papers in depth, and breadth of coverage. The people who have been hired are serious journalists who value their reputations and have put them on the line. In a world in which the internet and other media are cutting into the profitability of newspapers, and newspapers have been cutting staff, it will be interesting to watch.

This is a fascinating and complex project. On the one hand, it's always great to see a new daily launching. On the other, newspapers that are owned even in part by a government are inherently problematic.

Either way, if this brings a dose of independent-minded reporting and commentary to the area, it is to be celebrated.

Thursday, April 10, 2008

Crust of bread and such

There's corruption up the wahzoo in the Egyptian bread market. AP reports:

It's a sore point for a country struggling to contain bread riots: Bakeries that get government-subsidized flour often sell it on the black market at a huge profit, taking food from poor people's mouths.

But in Egypt — notorious for low wages and corruption — bakery workers say they have little choice but to steal the flour and sell it, both to feed their families and to pay the crushing bribes demanded by government officials and police....the crisis has also highlighted the widespread petty corruption pervading Egyptian life — from bakeries to hospitals to police stations — that many who earn meager paychecks maintain is the only way to make ends meet.

In one poor district of Cairo, a government official in charge of a public bakery shows his paycheck: After 20 years in his position, he earns about $55 a month, including supposed bonuses.

"I have to steal — how would I survive without stealing?" the official, a father of eight, told The Associated Press. He spoke on condition that he and the district where his bakery is located not be identified, fearing reprisals.

He admitted that he regularly sells a portion of his bakery's subsidized wheat on the black market. The government provides a ration of wheat to state-run bakeries at a subsidized price of about $1.50 for each 110-pound sack. The wheat is supposed to produce bread that sells for less than one cent per loaf. But many bakeries sell some of it to private bakeries at up to $37 a sack.

Part of the difference, the bakery employees pocket. But part is needed to pay off the host of government inspectors — from the police, the Supply Ministry, the city government and local councils — each of whom demands his own fat bribe.

"I just have to give bribes to most of them or they would file fines or close the bakery," said the official, whose bakery receives 68 sacks of subsidized flour every day.

A senior security official involved in government crackdowns on the black market wheat said public bakeries often sell off up to half the subsidized wheat they receive. He also acknowledged that many inspectors pockets bribes from bakers.

"Now if I'm an inspector and you, the baker, give me 1,000 pounds ($180) a month while my salary is 200 pounds ($37) a month, wouldn't I sell my conscience?" he said.

Unless the government "feeds the people, they will keep on stealing and receiving bribes," said the security official, who spoke on condition of anonymity in exchange for discussing the situation honestly.

One baker, Mohammed Abdel-Salam, said he used to work for a private firm that bought subsidized flour from public sector bakeries. "Very late at night or in the early hours of the morning, I used to go to the big public bakery and pick up three or four sacks of flour" for $37 each, he said. Private bakeries sell bread at market rates, up to 25 times the subsidized price....Unless ambulance workers get their obligatory "tips," patients might not reach the emergency rooms in public hospitals on time — and once there, patients must be sure to gave nurses a gratuity — called "baksheesh" in Arabic — just to get basic care. In schools, nearly all Egyptian students face pressure from their teachers to pay for "private lessons" after school hours.

Galal Amin, an economist at the American University in Cairo, said corruption in Egypt is a "law that cannot be violated."

"The bribe, big and small, for public employees is not only expected but obligatory," Amin wrote in the independent daily Al-Masry Al-Youm. "Bribes are given and received openly, without embarrassment. An employee considers it part of his monthly salary."

What about that dowry inflation in South Asia?

Using large-sample retrospective survey data from India, Bangladesh, Pakistan, and Nepal, we assess the empirical evidence for dowry inflation. We find no evidence that real dowry amounts have systematically increased over time in South Asia.

The same question could be asked about dowries in the UAE. The claim is that they are 'spiraling out of control' (as it's often put), but is that really true?

Tuesday, April 08, 2008

Cognitive dissonance will have to be reassessed

It ain't necessarily so:

The Monty Hall Problem has struck again, and this time it’s not merely embarrassing mathematicians. If the calculations of a Yale economist are correct, there’s a sneaky logical fallacy in some of the most famous experiments in psychology.

The economist, M. Keith Chen, has challenged research into cognitive dissonance, including the 1956 experiment that first identified a remarkable ability of people to rationalize their choices.

Teaching Bayes Rule to MBA students a few years back I did what I thought was a rather good job of explaining to them the Monty Hall Problem. (Given the design of the problem, once you choose any door there is a two thirds chance that Monty is constrained and shows you what is behind one of the other doors because the prize is behind the door he did not reveal; you should switch to the door he did not reveal.) They were convinced I had lost my mind. At least I found out they were alive.

Unemployment amongst Gulf nationals persists

Governments in the oil-rich Gulf Arab states have so far failed to tackle unemployment among their own citizens despite impressive economic growth fed by record oil revenues. Despite most Gulf Cooperation Council (GCC) members having programmes to train their nationals to join the workforce, the region’s private sector still relies on imported labour.

Faced with an inability — or unwillingness — among their own people to work in the private sector, governments remain the main employer of native workers in the GCC, which comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

Saudi economist Ihsan Bu Hulaiga believes that the GCC labour market has been deformed because of its openness to foreign workers and because the public sector functions as a convenient employer for citizens....despite its wealth, unemployment among Saudis themselves was 11 percent in 2007, according to official figures, just one percent down from the previous year.

Traditionally, the public sector in GCC states has employed as many nationals as possible under conditions considered very relaxed compared with the private sector.

“The public sector attracts young people for its job security and fewer working hours,” Bu Hulaiga lamented.

But because the private sector generates greater job opportunities, most GCC countries have quota systems for nationals in private business.

This policy “contradicts all economic concepts,” said Bu Hulaiga.

The solution is to make “national manpower, which is unqualified and more costly (than foreigners), more appealing to employers,” he said.

“We have a great chance to qualify our young people amid the current economic growth.”

Bu Hulaiga believes GCC governments should make the private sector more attractive to Gulf nationals by providing training and subsidising salaries so they are on par with those of the public sector.

Kuwait already does so. Private companies pay their employees the set basic salary and the government chips in with allowances....Half of the employees in the public sector represent what Kuwaiti economist Jassem Saadun called "masked unemployment."

Paying to create such posts "is a way to distribute oil dividends," he told a seminar last month, but warned that such a policy will not work in the long term....Bahrain and Oman are less well-off as their oil reserves are dwindling.

Unemployment in Bahrain dropped dramatically to around four percent in 2007 according to official figures, after it was reported to have soared to 15 percent of a 120,000-strong workforce in 2005.

Bahrain also established a programme to aid job seekers, with a governmental body trying to place them in the most suitable posts.

Because it comparatively poorer, Bahrain has had to adopt a sounder approach. For more, check out the links here.

The roots of the grain problem

For once I agree with Paul Krugman:

First, there’s the march of the meat-eating Chinese — that is, the growing number of people in emerging economies who are, for the first time, rich enough to start eating like Westerners. Since it takes about 700 calories’ worth of animal feed to produce a 100-calorie piece of beef, this change in diet increases the overall demand for grains.

Second, there’s the price of oil. Modern farming is highly energy-intensive: a lot of B.T.U.’s go into producing fertilizer, running tractors and, not least, transporting farm products to consumers. With oil persistently above $100 per barrel, energy costs have become a major factor driving up agricultural costs.

High oil prices, by the way, also have a lot to do with the growth of China and other emerging economies. Directly and indirectly, these rising economic powers are competing with the rest of us for scarce resources, including oil and farmland, driving up prices for raw materials of all sorts.

Third, there has been a run of bad weather in key growing areas. In particular, Australia, normally the world’s second-largest wheat exporter, has been suffering from an epic drought....Where the effects of bad policy are clearest, however, is in the rise of demon ethanol and other biofuels.

The subsidized conversion of crops into fuel was supposed to promote energy independence and help limit global warming. But this promise was, as Time magazine bluntly put it, a “scam.”

This is especially true of corn ethanol: even on optimistic estimates, producing a gallon of ethanol from corn uses most of the energy the gallon contains. But it turns out that even seemingly “good” biofuel policies, like Brazil’s use of ethanol from sugar cane, accelerate the pace of climate change by promoting deforestation.

And meanwhile, land used to grow biofuel feedstock is land not available to grow food, so subsidies to biofuels are a major factor in the food crisis. You might put it this way: people are starving in Africa so that American politicians can court votes in farm states.

Oh, and in case you’re wondering: all the remaining presidential contenders are terrible on this issue.

Monday, April 07, 2008

Hillary will fix law of gravity

Egypt arrests 500

Egypt's government said police arrested more than 500 people across the country as it suppressed a one-day national strike to protest rising food prices.

Two hundred textile workers were arrested in the northern town of Al-Mahala El-Kobra, said a spokesman for the Interior Ministry, speaking on condition of anonymity, in accord with departmental policy. Police prevented a rally in Cairo's main Tahrir Square and also made arrests in the towns of Alexandria, Mansoura and Mahala.

Egyptian state employees from doctors to factory workers are demanding higher wages after a jump in food prices around the world pushed up the cost of living in a country that imports about half of its grain.

Today's arrests came as President Hosni Mubarak, Egypt's longest serving leader in modern times, increases pressure on his critics. Police arrested at least 140 members of the outlawed Muslim Brotherhood, the country's biggest opposition group, last month and a journalist was sentenced to six months hard labor for reporting that Mubarak was ill.

Demonstrators outside the headquarters of the lawyers' guild in Cairo today shouted slogans including: ``Keep burning us with prices and you will be burned by chaos soon'' and ``Down, down with Mubarak.'' Egyptian inflation accelerated to 12.1 percent in February from 10.1 percent in January. Bread and grain prices have jumped more than 25 percent in the past year.

Not guilty

A growing work force of home-office laborers and entrepreneurs, armed with computers and smartphones and wired to the hilt, are toiling under great physical and emotional stress created by the around-the-clock Internet economy that demands a constant stream of news and comment.

Saturday, April 05, 2008

Smiley face reduces energy consumption

Friday, April 04, 2008

Inflation in the UAE, Oman and elsewhere

An analysis of inflation in the regional economies from the Gulf Research Centre in Dubai says,

Inflation is at 16-year highs in Saudi Arabia and Oman, a 19-year peak in the United Arab Emirates and just below record levels in Qatar. Disparate trends and obfuscating analyses abound. This is obvious in the absence of scientifically modeled dataset on the macro trends of the GCC economies; leave alone the unbalanced or non-existent consumer price indexes (CPI), particularly in case of the UAE. ... As per our estimates, inflation rates in Bahrain, Kuwait, Oman and Saudi Arabia were 8.4 percent, 6.6 percent, 5.3 percent and 6.5 percent respectively, in comparison to a staggering 12.8 percent and 11.3 percent in Qatar and the UAE.

Thursday, April 03, 2008

Export bans

When governments ban exports it has the temporary effect -- sometimes vanishingly temporary -- of leaving more on the domestic market and thereby reducing the domestic price. But the long run effect is undercut the incentive of producers to invest in that market, and -- more broadly -- and, because bans harm the government's reputation not to behave opportunistically, to undercut incentives to invest throughout the economy.

Yet governments still do it, and things like it, in an effort to control prices.

Lastest cases in point:

1. India's rice ban. (The story also details the UAE's price ceiling on rice -- another attempt to violate economic laws akin to the law of gravity. For more about UAE concerns see the Gulf News.)

India is led by an economist who had been doing a great good job of instituting market-based reforms. Indeed, one of the reasons the price of rice is up is that domestic demand has grown as the Indian economy has expanded. (Likewise, China's economy.) Another reason is that the cost of transporting rice is up due to fuel costs -- which can be traced back to growing demand for oil in reformed economies.

Is India's leader now following the lead of another leader with an economics degree? I'm referring to Robert Mugabe. One of the many things he's done to destroy Zimbawe's economy is to try to control prices.

UAE's reexport trade with Iran

Roadside bombings of American troops in Iraq were occurring with bloody regularity when military investigators made a disturbing discovery: American-made computer circuits sold to a trading company in the United Arab Emirates had turned up in the bomb detonators.

That finding set off a clash with Washington last year when the Bush administration cited the diversion of the computer circuits to Iran, and eventually Iraq, as proof that the United Arab Emirates were failing to prevent American technology from slipping into the wrong hands. ...Yousef al-Otaiba, an adviser to the crown prince of the United Arab Emirates, said his country was more closely monitoring goods that it re-exported while blocking items that might help Iran build weapons systems. But trade experts, a Commerce Department investigator and Iranian traders in Dubai said evidence was scarce that the new export control law was being broadly enforced.

"It has virtually had no effect, to be honest," said Nasser Hashempour, deputy president of the Iranian Business Council in Dubai. "If someone wants to move something - get it to Iran - it is easy to be done."...Executives at several of the so-called red flag companies, those suspected of violating American export controls, said they had faced no increased scrutiny in Dubai.

It's hard for me to understand the level of reexport in Dubai -- and that's what it built its reputation on -- unless you include the factor that much of the money to be made in reexport is meant to defeat some trade barrier erected for economic or political reasons.